"Moratorium" is one of the first words people hear when a company enters insolvency, and one of the most misunderstood. In simple terms, it is a legal freeze. From the day the NCLT admits a corporate insolvency case, creditors cannot sue the company, enforce security, or take back property it occupies, and the company cannot sell its assets. The aim is to keep the company and its assets together while creditors decide its future.
But the moratorium has limits. It protects the company, not its directors or guarantors. It does not stop every kind of proceeding. And there are different moratoria for different processes under the Code. This guide explains what the corporate moratorium under Section 14 does, what it does not do, how long it lasts, and how other moratoria under the Code work.
हिंदी में सारांश
मोरेटोरियम का मतलब है कानूनी रोक। जब NCLT किसी कंपनी की दिवाला याचिका सà¥à¤µà¥€à¤•à¤¾à¤° करता है, तो धारा 14 के तहत कंपनी पर मà¥à¤•à¤¦à¤®à¥‡, करà¥à¤œà¤¼ वसूली, सिकà¥à¤¯à¥‹à¤°à¤¿à¤Ÿà¥€ का पà¥à¤°à¤µà¤°à¥à¤¤à¤¨ और कंपनी के कबà¥à¤œà¤¼à¥‡ वाली संपतà¥à¤¤à¤¿ की वापसी पर रोक लग जाती है, और कंपनी अपनी संपतà¥à¤¤à¤¿ नहीं बेच सकती। यह रोक निदेशकों और गारंटरों पर आम तौर पर लागू नहीं होती। मोरेटोरियम पà¥à¤²à¤¾à¤¨ मंज़ूर होने या परिसमापन आदेश तक चलता है।
The moratorium in brief
It starts on admission
The moratorium begins on the date the NCLT admits the case and is declared in the admission order.
It freezes four things
Suits and proceedings against the company, transfers of its assets, enforcement of security, and recovery of property it occupies.
Essential supplies continue
Electricity, water, telecom and similar supplies cannot be cut off during the moratorium.
It protects the company only
Personal guarantors and directors are generally not protected by the corporate moratorium.
Some matters are excluded
Transactions notified by the government, and certain criminal proceedings against individuals, are outside it.
It ends with the process
It lasts until a resolution plan is approved or a liquidation order is passed.
What Section 14 freezes
Section 14(1) lists four things that are prohibited during the moratorium:
- Suits and proceedings against the company, including the execution of any judgment, decree or order in any court, tribunal, arbitration panel or other authority. A pending civil suit for recovery, an arbitration claim against the company and an execution petition all pause.
- Transferring, encumbering or disposing of the company's assets or any legal right or beneficial interest in them. The company cannot sell or mortgage assets outside the process.
- Enforcement of security interests, including under SARFAESI. A bank cannot take possession of or sell the company's mortgaged factory during the moratorium.
- Recovery of property by an owner or lessor where the property is occupied by or in the possession of the company. A landlord cannot evict the company from leased premises during the process, though rent for the period of the process is paid as a process cost.
Section 14(2) adds that supplies of essential goods or services, as specified, shall not be terminated, suspended or interrupted. Section 14(2A) allows the professional to treat other supplies as critical to the company's going concern, and they then continue too, with payment as process costs.
What the moratorium does not cover
Guarantors. In SBI v V. Ramakrishnan (2018), the Supreme Court held that the corporate moratorium does not protect personal guarantors. Lenders can proceed against guarantors while the company is in CIRP. Guarantors face their own process under Part III of the Code.
Criminal cases against individuals. In P. Mohanraj v Shah Brothers Ispat (2021), the Supreme Court held that cheque bounce proceedings under Section 138 of the Negotiable Instruments Act against the company are covered by the moratorium, but proceedings against directors and other natural persons can continue.
Notified transactions. Section 14(3) excludes transactions notified by the central government in consultation with a financial regulator, and certain other matters.
Proceedings by the company. The moratorium stops proceedings against the company, not claims the company brings against others. The professional can continue the company's own suits and arbitrations to recover money.
Regulatory action. Some regulatory and statutory proceedings may continue where they are not about recovering money from the company; tribunals look at their nature.
What to do if the moratorium affects you
Read the admission order
Note the date of admission and the moratorium declared.
Inform courts and authorities
If you have a case or enforcement action against the company, inform the court or authority of the moratorium and seek appropriate orders.
File your claim
File your claim with the interim resolution professional within the time in the public announcement.
Check your other rights
If you hold a guarantee or have a case against directors personally, those may continue. Take advice.
For suppliers and landlords
If you continue supplying or the company continues to occupy your premises, get written confirmation that charges for the process period will be paid as process costs.
Track the process
The moratorium ends when a plan is approved or liquidation is ordered; plan your next step accordingly.
Moratoria under the IBC
| Moratorium | When it applies | Key feature |
|---|---|---|
| Section 14 (CIRP) | From admission of a company's CIRP | Freezes suits, transfers, enforcement and recovery of property |
| Section 54E (MSME pre-pack) | From commencement of a pre-pack | Similar to Section 14, for the pre-pack process |
| Section 33(5) (liquidation) | After a liquidation order | No suit against the company without the NCLT's leave |
| Section 96 (interim, individuals) | On filing an individual's application | Since 26 May 2026, does not apply to personal guarantors of company loans |
| Section 101 (individuals) | On admission of an individual's application | Freezes legal actions in respect of the debtor's debts for the process period |
How long it lasts
The corporate moratorium lasts from the date of admission until the NCLT approves a resolution plan under Section 31 or passes a liquidation order under Section 33. If the case is withdrawn under Section 12A or the admission order is set aside on appeal, the moratorium ends too. Once a plan is approved, it binds all creditors, and claims not included in it are extinguished, as the Supreme Court held in Ghanashyam Mishra (2021). In liquidation, a different rule applies: under Section 33(5), no suit or legal proceeding can be started against the company without the NCLT's leave. See moratorium under Section 14 for practical advice on dealing with it.
A bank stops a factory sale
Here's a made-up example. A bank had taken symbolic possession of a Ghaziabad factory under SARFAESI and fixed an auction date. Two weeks before the auction, another creditor's Section 9 application against the company was admitted, and the NCLT declared a moratorium.
The bank had to cancel the auction, because enforcement of security is frozen during the moratorium. It filed its claim as a secured financial creditor and joined the committee of creditors. The factory was later sold as part of a resolution plan, and the bank received its share under the plan.
A guarantor who expected protection
Here's a second made-up example. A promoter had guaranteed his company's bank loan. When the company was admitted into CIRP, he assumed that the moratorium also stopped the bank's DRT case against him personally. It did not. Following SBI v V. Ramakrishnan, the DRT continued against him, and the bank later also filed an insolvency application against him as a personal guarantor. Because it was filed after 26 May 2026, no interim moratorium applied on filing.
Moratorium questions to ask
- Is my claim against the company or against a director or guarantor?
- Is my proceeding a suit or recovery action, or a criminal case against an individual?
- Am I enforcing security, or recovering property the company occupies?
- Does my supply count as essential, or has the professional treated it as critical?
- Is my transaction one notified as excluded?
- When did the moratorium start, and has it ended?
Using the moratorium as a company
Some companies see insolvency as a way to get breathing space from creditors. The moratorium does give the company protection, but at a price: the board is suspended, control passes to a resolution professional, and the committee of creditors decides the company's future. Promoters who file under Section 10 hoping to keep control are often disappointed. The MSME pre-pack is different, because promoters usually stay in management during the process and propose the base plan. For companies outside the MSME category, a negotiated restructuring with lenders, or a scheme under Section 230 of the Companies Act, may be better ways to get time without losing control. See compromise and arrangement.
Key rulings on the moratorium
| Case | What it decided |
|---|---|
| SBI v V. Ramakrishnan (2018) | The corporate moratorium does not protect personal guarantors |
| P. Mohanraj v Shah Brothers Ispat (2021) | Section 138 proceedings against the company are covered; those against directors can continue |
| Ghanashyam Mishra v Edelweiss ARC (2021) | Claims not included in an approved plan, including government dues, stand extinguished |
| Anand Rao Korada v Varsha Fabrics (2019) | Court-ordered auctions of the company's assets must stop once the moratorium applies |
Contracts and termination during the moratorium
Can a counterparty terminate a contract with the company because it has entered insolvency? The Code does not contain a general ban on termination, but the Supreme Court in Gujarat Urja Vikas Nigam v Amit Gupta (2021) held that the NCLT can stop termination of a contract that is central to the company's survival as a going concern, where termination is solely because of the insolvency. Power purchase agreements, licences and key supply contracts are typical examples. Counterparties who have their own grounds for termination, unrelated to the insolvency, may be in a different position. Anyone considering termination should take advice before acting.
Frequently Asked Questions
What does moratorium mean in insolvency?
A legal freeze on suits, recovery, enforcement and asset transfers involving the company, from admission of the case until a plan or liquidation.
Does the moratorium protect directors?
No. It protects the company. Proceedings against directors personally can usually continue.
Does it protect personal guarantors?
Generally not, as held in SBI v V. Ramakrishnan. Guarantors face their own process.
Can a bank sell mortgaged property during the moratorium?
No. Enforcement of security, including under SARFAESI, is frozen.
Can a landlord evict the company?
No, not during the moratorium. Rent for the process period is paid as a process cost.
Can electricity be cut off?
No. Essential supplies cannot be terminated during the moratorium.
Do cheque bounce cases stop?
Cases against the company are covered; cases against directors and other individuals can continue.
When does the moratorium end?
When the NCLT approves a resolution plan or passes a liquidation order, or if the case is withdrawn or the admission set aside.
Affected by a Moratorium?
Tell us your claim or case against the company. We will explain what is frozen, what can continue and what to do now.
This page gives general information about the law as it stood when it was last reviewed. It is not legal advice on your case and does not promise any result. IBC rules and NCLT procedures change often, so outcomes depend on your own documents, dates and facts.
Have a question about your own case?
Send us the notice, the petition or the order. We will tell you where you stand, which bench hears it and the date the next step is due, in plain words.
